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UNIVERSITY 

OF  CALIFORNIA 

LOS  ANGELES 


SCHOOL  OF  LAW 
LIBBLARY 


SUPPLEMENT    TO    TREASURY    DECISIONS 

(T.    D.   2868) 


TREASURY  DEPARTMENT 

UNITED  STATES  INTERNAL  REVENUE 


U,S.    Ii/i"h8.fv»;».l   "P-flAf-AMM*.  Se^-^h^ 
REGULATIONS  No.  55 


REGULATIONS 

PROMULGATED  BY  THE 

COMMISSIONER  OF  INTERNAL  REVENUE 

WITH  THE  APPROVAL  OF  THE 

SECRETARY  OF  THE  TREASURY 

RELATING  TO  THE 

COLLECTION  OF  TAX  ON 
MOTION  PICTURE  FILMS 


TITLE  IX,   SECTION  906.  OF 
THE  REVENUE  ACT  OF  1913 


WASHINGTON 

GOVERNMEiNT  PRINTLNG  OFFICE 

1919 


s 

50   . 


i? 


TABLE  OF  CONTENTS. 


'Article.  Page. 
IMPOSITION  OF  TAX. 

Section  906  of  Revenue  Act  of  1918 5 

1.  Use  of  terms 5 

2.  Effective  date 5 

PERSONS  LIABLE. 

3.  Lessors ;  owners  ;  lessees 5 

MEASURE  OF  TAX. 

4.  Lessors;  bad  debts  and  expenses;  deductible  items 6 

5.  Owner-exhibitors '. 6 

6.  Lessees 7 

TRANSFER  OF  BURDEN  OF  TAX. 

Section  90G  or  Reo^nue  Act  of  191S 7 

7.  Transfer  of  burden  of  tax 7 

8.  Charging  tax  to  lessee , 7 

TAX  IN  LIEU  OF  OTHER  TAXES. 

Section  90G  of  REVENtTE  Act  of  1918 8 

9.  Tax  in  lieu  of  other  taxes 8 

LEASE  AT  LESS  THAN  FAIR  MARKET  PRICE. 

Section  901  of  Revenue  Act  of  1918 8 

10.  Lease  at  less  than  fair  market  price S 

RETURN  AND  PAYMENT  OF  TAX. 

Sections  903,  1309,  Revenue  Act  of  1918 8-9 

11.  Return  ;  date  when  due ;  first  return ;  branches ;  receivers,  etc. ;  tax- 

payer's records ;  forms  ;  inspection  of  books  ;  payment 9 

EXTENSION  OF  EXISTING  STATUTES. 

Section  1305  of  Revenue  Act  of  1018 9 

12.  Aids  to  collection  of  tax 10 

CREDITS  AND  REFUNDS. 

Section  1310  (a)  of  Revenue  Act  of  1918 10 

13.  Credits  and  refunds 10 

14.  Claims  for  refund 10 

1203G5— 10  (3) 


4 
MEDIUM  OF  PAYMENT  OF  TAX. 

Page. 
Section  1314  of  I1k\tcnue  Act  of  1918 10 

15.  Payment  by  uncertified  check 11 

16.  Pi'ocedure  with  respect  to  di.«honored  checks 11 

MISREPRESENTATION  OF  TAX. 

Section  1319  of  Revenue  Act  of  1918^ 11 

17.  Misrepresentation  of  tax 12 

PENALTIES. 
Section  3176  R.  S. ;  Sections  003,  1308,  1319,  Revenue  Act  of  1918— _  12-13 
AUTHORITY  FOR  REGULATIONS. 

18.  Promulgation  of  regulations 13 


IMPOSITION  OF  TAX. 

THE  LAW. 

Sec.  006.  That  on  and  after  the  first  day  of  May,  1919,  any  person 
engaged  in  the  business  of  leasing  or  licensing  for  exhibition  positive 
motion-picture  films  containing  pictures  ready  for  projection  shall 
pay  uionthly  an  excise  tax  in  re.spect  to  carrying  on  such  business  equal 
to  five  per  centum  of  the  total  rentals  earned  from  each  such  lease 
or  license  during  the  preceding  month.  If  a  person  owning  such  a 
film  exhibits  it  for  profit  he  shall  pay  a  tax  equivalent  to  five  per 
centum  of  the  fair  rental  or  license  value  of  such  film  at  the  time 
and  place  where  and  for  the  period  during  which  exhibited.     *     *     * 

Article  1.  Use  of  terms. — In  these  regulations,  for  convenience, 
unless  obviously  inapplicable,  the  term  "  Film "  shall  be  held  to 
mean  positive  motion-picture  films  containing  pictures  ready  for 
projection ;  "  Person  "  shall  include  partnerships,  corporations,  and 
as.sociations,  as  well  as  individuals ;  "  Lease  "  shall  include  license, 
and  any  method  of  letting  and  acquiring  the  use  of  a  film  for  exhibi- 
tion, for  which  a  charge  is  made ;  "  Lessor  "  shall  include  licensor, 
and  any  person  granting  to  another  the  right  to  the  use  for  exhibi- 
tion of  a  film  for  profit ;  "  Distributor  "  shall  be  synonymous  with 
lessor  or  licensor ;  "  Exhibitor  "  shall  be  synonymous  with  "  lessee  " 
or  "  licensee  " ;  and  "  Rental  value  "  shall  include  "  license  value." 

Art.  2.  Effective  date. — The  tax  is  effective  May  1,  1919,  and 
attaches  to  sums  accruing  on  account  of  exhibitions  of  films  gi^'cn  on 
or  after  that  date.    See  also  article  11. 

PERSONS  LIABLE. 

Art.  3.  Lessors. — All  persons  whose  business  it  is,  as  principals, 
■whether  it  is  their  sole  or  principal  business  or  not,  to  grant  to 
others  the  right  to  use  films  for  exhibition,  are  liable  to  the  tax.  If 
leases,  contracts,  or  agreements  wliereby  the  right  to  the  use  of 
films  is  conveyed  are  entered  into  by  one  person  acting  for  and  in 
the  name  of  another,  the  principal  is  liable  to  the  tax.  One  exe- 
cuting such  leases,  contracts,  or  agreements  in  his  own  name  will  be 
regarded  as  a  principal  and  as  liable  to  the  tax,  unless  the  contrary 
is  shown. 

Owners. — One  who,  being  the  owner  of  a  film  or  of  any  interest 
therein,  himself  exhibits  such  film  for  profit,  is  also  subject  to  tax. 

Lessees. — As  to  transfer  of  liability  from  lessors  to  lessees,  by  the 
statute  under  certain  circumstances,  see  article  7.  As  to  transfer  of 
burden  of  tax  by  agreement,  see  article  8. 

(5) 


MEASURE  OF  TAX. 

Art.  4.  Lessors. — The  provision  of  the  statute  allowing  the  owner 
who  exhibits  a  film  to  measure  the  tax  by  the  fair  rental  value  has  no 
application  to  lessors.  The  tax  to  which  a  lessor  is  liable  is  5  per 
cent  of  the  total  rentals  earned. 

Total  rentals  earned. — The  total  rental  earned  is  not  the  net  profit 
arising  from  each  lease,  etc.,  but  is  the  gross  simi  due  and  payable  to 
the  lessor  by  each  exhibitor  upon  each  lease  dvu-ing  the  month,  less 
the  amounts  represented  by  bona  fide  cancellations  and  reductions  of 
rentals  made  in  the  ordinary  and  regular  course  of  business,  but  with 
no  reductions  on  account  of  expenses,  losses,  bad  debts,  etc. 

Deductible  items. — Credits  due  to  {a)  cancellation  because  of  the 
failiu-e  of  the  lessor  to  perform  contractual  obligations  (as,  for  in- 
stance, failure  to  provide  or  deliver  a  film  contracted  for),  or  to  (h) 
reduction  of  the  rental  charge  which  is  predicated  upon  a  reasonable 
basis,  when  in  good  faith  actually  given  in  accordance  with  a 
recognized  trade  usage  (as,  for  instance,  in  case  of  failure  of  a  film 
to  attract  sufficiently  profitable  audiences)  are  deductible,  and  allow- 
ances therefor  may  be  made  in  computing  the  tax.  If  the  credit  is 
given  after  tax  on  the  amomit  due  under  the  original  contract  has 
been  paid,  deduction  thereof  may  be  made  in  the  return  for  the 
month  during  which  the  credit  is  given. 

Bad  debts  and  expenses. — The  tax  being  measured  by  the  amount 
earned,  whether  actually  received  or  not,  no  allowances  or  deductions 
may  be  made  for  losses  or  unpaid  accounts  charged  off.  Neither  will 
any  credit  or  deduction  from  gross  compensation  be  allowed  to  be 
made  for  any  tax  or  other  expense  incurred  by  the  lessor,  or  ex- 
hibitor, such  as  cost  of  operations,  commissions,  advertising,  or  other 
charges,  either  general  or  special. 

Art,  5.  Owner-exhibitors. — An  exhibitor  who  is  also  the  owner  of  a 
film  must  pay  a  tax  equivalent  to  5  per  cent  of  the  fair  rental  value 
of  the  film  were  it  leased  or  licensed  for  exliibition. 

The  fair  rental  or  license  value  of  a  film  exhibited  by  an  owner 
for  profit  shall  ordinarily  be  held  to  be  represented  by  the  net  profits 
he  derives  therefrom,  which  shall  be  determined  by  deducting  from 
his  gross  receipts  his  reasonable  expenses  or  allowances  for  services 
(but  no  deduction  will  be  permitted  for  such  items  as  expenses  of 
production,  upkeep,  or  replacement  of  films) ;  but  should  his  return 
show  that  such  net  profits  do  not  amount  to  33-^-  per  cent  of  his  gross 
receipts,  he  shall  accompany  his  return  with  a  statement  in  detail 
showing  the  items  entering  into  the  expenses  and  allowances  charged 
against  such  receii)ts.  It  is  conceded  that  this  ruling  may  not  be 
entirely  applicable  to  all  cases ;  therefore  particular  cases  will  be  sub- 
ject to  review  by  the  Commissioner  upon  application. 


Akt.  6.  Lessees. — T\nien  liability  to  the  tax  is  transferred  by  opera- 
tion of  law  from  the  lessor  to  the  lessee  (see  art.  7)  the  same  allow- 
ances for  cancellations  or  reductions  of  rental  charges  may  be  made  as 
when  the  tax  is  pa3'able  by  the  lessor. 

TRANSFER  OF  BURDEN  OF  TAX. 

Sec.  906.  *  *  *  If  any  such  person  has  prior  to  December  sixth, 
nineteen  hundred  and  eighteen,  made  a  bona  fide  contract  witli  any  per- 
son for  the  lease  or  licensing,  after  the  tax  imposed  by  this  section  takes 
effect,  of  such  a  film  for  exhibition  for  profit,  and  if  such  contract  does 
not  permit  the  adding  of  the  whole  of  the  tax  imposed  by  this  section  to 
the  amount  to  be  paid  under  such  contract,  then  the  lessee  or  licensee 
shall,  in  lieu  of  the  lessor  or  licensor,  pay  so  much  of  such  tax  as  is  not 
so  permitted  to  be  added  to  the  contract  price.     *     *     * 

Art.  7.  Where  a  contract  was  made  prior  to  December  6,  1918,  con- 
veying to  an  exhibitor  the  right  to  the  use  of  a  film  on  or  after 
May  1,  1919,  the  liability  for  the  whole  or  such  portion  of  the  tax  as 
can  not,  under  the  contract,  be  added  to  the  amount  to  be  paid  under 
such  contract  is  on  the  exhibitor,  who  shall  make  returns  and  pay  tax 
on  rentals  due  and  payable  under  the  contract  on  account  of  exhibi- 
tions given  on  and  after  May  1,  1919,  in  the  manner  of  a  lessor  or 
licensor,  as  indicated  by  article  11  of  these  regulations.  The  lessor 
or  licensor  shall,  on  or  before  the  last  day  of  June,  1919,  file  with  the 
collector  a  statement,  in  duplicate,  showing  the  tax  liability  of  the 
exhibitor.  If  the  lessor  or  licensor  is  himself  subject  to  tax,  such 
statement  shall  be  filed  with  his  return  for  the  month  of  Ma}'',  1919. 
A  separate  statement  shall  be  made  in  the  case  of  each  exhibitor. 
The  collector  will  preserve  one  copy  of  each  statement  for  use  in 
the  determination  by  him  of  whether  returns  required  of  lessees  and 
licensees  are  duly  made.  The  other  copies  received  during  each 
month  will  be  forwarded  together  to  the  collector  of  internal  revenue 
for  auditing  purposes. 

Art.  8.  Charging  tax  to  lessee. — Except  in  circumstances  indicated 
by  article  7,  the  law  requires  the  lessor  or  licensor  of  leased  or  licensed 
films  to  pay  the  tax.  It  does  not,  however,  prohibit  the  charging 
of  the  tax  to  the  exhibitor  by  the  distributor.  Wliere  the  tax  is 
charged  to  the  exhibitor  as  a  separate  item,  the  tax  will  be  based  upon 
the  amount  charged  for  the  use  of  the  film  only,  and  not  upon  the  com- 
bined total  including  the  tax.  Where,  however,  a  lessor  does  not  sep- 
arately bill  the  tax  to  the  exhibitor,  but  advances  his  price  to  cover 
the  tax,  the  tax  must  be  measured  by  the  full  amount  of  such  ad- 
vanced price.  With  respect  to  leases  or  licenses  entered  into  before 
December  6,  1918,  which  do  not  permit  adding  the  tax  to  the  amount 
to  be  paid  under  the  lease  or  license  and  the  transferring  of  liability 
in  such  cases,  see  article  7. 


TAX  IN  LIEU  OF  OTHER  TAXES. 

Skc.  90(5.  *  *  *  The  tax  imposed  by  this  section  shall  he  in  lieu 
of  the  tax  imposed  by  subdivisions  (c)  and  (d)  of  section  six  hundred 
of  the  Revenue  Act  of  1917. 

Art.  9.  Tax  in  lieu  of  otker  taxes. — While  the  new  tax  is  in  lieu 
of  taxes  imposed  by  the  Act  of  October  3,  1917,  this  merely  means 
that  no  tax  shall  be  asserted  under  the  prior  statute  on  any  sale  or 
lease  of  a  moving-picture  film  occurring  or  executed  on  or  after  May 
1,  1919,  the  effective  date  of  the  new  tax.  Persons  otherwise  liable 
to  the  tax  imposed  by  the  Act  of  February  24,  1919,  are  not  relieved 
of  such  liability  by  reason  of  having  paid  the  tax  imposed  by  the 
prior  Act.  Neither  does  payment  of  the  new  tax  entitle  the  taxpayer 
^o  refund  of  anj-  taxes  paid  under  the  earlier  statute. 

LEASE  AT  LESS  THAN  FAIR  MARKET  PRICE. 

Sec.  901.  Tliat  if  any  person  *  *  *  leases  or  licenses  for  ex- 
hibition any  positive  motion-picture  film  containing  a  pictui'e  ready  for 
projection,  and,  whether  through  any  agreement,  arrangement,  or 
understanding,  or  otherwise,  *  *  *  leases  or  licenses  sucli  ai-ticle 
at  less  than  the  fair  market  price  obtainable  therefor,  either  (a)  in 
sucli  manner  as  directly  or  indirectly  to  benefit  such  person  or  any 
pei-son  directly  or  Indirectly  interested  in  the  business  of  such  person, 
or  (b)  with  intent  to  cause  such  benefit,  the  amount  for  which  such 
article  is  *  *  *  leased  or  licensed  shall  be  taken  to  be  the  amount 
which  would  have  been  received  from  the  *  *  *  lease,  or  license 
of  such  article  if     '^-     *     *     leased,  or  licensed  at  the  fair  market  price. 

Art.  10.  This  section  will  be  regarded  as  intended  to  cover  the  pos- 
sible attempt  by  a  lessor  to  disguise  the  compensation  received  by  him 
from  the  exhibition  of  a  film;  thus,  if  a  le^or,  through  any  device 
contrives  to  lease  a  film  at  less  than  the  fair  market  price  or  rental, 
and  he  derives  or  has  the  intent  to  derive  some  other  benefit  of  any 
kind  from  the  transaction,  the  tax  shall  be  based  on  the  fair  market 
price  or  rental,  and  not  that  named  in  the  lease.  If  such  method  is 
followed  for  the  purpose  of  evading  or  defeating  the  tax  liability, 
penalt}'  will  also  be  incurred. 

RETURN  AND  PAYMENT  OF  TAX. 

Sec.  903.  That  every  person  liable  for  any  tax  imposed  by  section 
'  *  *  906  shall  make  monthly  returns  under  oath  in  duplicate  and 
pay  the  taxes  *  "'  *  to  the  collector  for  the  district  in  which  is 
located  the  principal  place  of  business.  Such  returns  shall  contain 
such  information  and  be  made  at  such  times  and  in  such  manner  as 
the  Commissioner,  with  the  ap]>roval  of  the  Secretary,  may  by  regula- 
tions prescribe.  The  tax  shall,  without  assessment  by  the  Commis- 
sioner or  notice  from  the  collector,  be  due  and  payable  to  the  collector 
at  the  time  so  fixe;l  for  filing  the  return.     *     *     * 


Section  1309  of  the  Act  also  provides  that  the  Commissionerj  with 
the  approval  of  the  Secretarj'', 

may  by  regulation  provide  that  any  return  required  by  Titles  *  *  * 
IX  *  *  *  to  be  under  oatli  may,  if  the  amount  of  the  tax  covered 
thereby  is  not  in  excess  of  $10,  be  signed  or  acknowledged  before  two 
witnesses  instead  of  under  oatli. 

Art.  11.  Return. — Any  person  engaged  in  the  business  of  leasing 
or  licensing  films,  and  each  owner  who  exhibits  his  film  for  profit, 
must  make  return  each  month  in  duplicate  and  under  oath  (except 
that  if  the  amount  of  the  tax  covered  thereby  is  not  in  excess  of  $10 
such  return  may  be  signed  or  acknowledged  before  two  witnesses  in- 
stead of  under  oath)  and  pay  the  tax  upon  the  total  rentals  earned, 
or  (in  the  case  of  an  oAvner-exhibitor)  upon  the  fair  rental  valiic  of 
the  film  for  the  period  or  periods  of  the  preceding  month,  during 
which  exhibitions  were  given,  to  the  collector  of  internal  revenue 
for  the  district  in  which  his  principal  place  of  business  is  located,  in 
accordance  with  these  regulations.  But  see  below  as  to  taxpayer's 
records. 

Date  when  due. — The  return  for  each  month  is  to  be  rendered  and 
the  tax  paid  on  or  before  the  last  day  of  the  succeeding  month. 

First  return. — The  first  return  shall  cover  the  tax  accruing  on  and 
after  May  1,  1919,  and  be  made  on  or  before  June  30,  1919. 

Branches. — Transactions  of  branches  should  be  included  in  the 
returns  rendered  by  the  principal  office. 

Receivers,  etc. — The  receiver  or  trustee  in  bankruptcy  of  a  lessor 
or  owner  and  exhibitor  conducting  a  business  under  court  order  is 
liable  to  the  tax. 

Taxpayer's  records. — Any  taxpayer  whose  books  ai*e  so  kept  that 
they  accurately  reflect  the  business  done  with  each  lessee,  or  with 
each  person  dealt  with,  on  a  weekly  basis,  »?ay  render  his  return  in 
groups  of  as  many  weeks  as  have  their  endings  in  each  calendar 
month,  but  the  total  business  done  during  each  week  must  be  correctly 
shown  and  added  so  as  to  indicate  the  total  business  done  for  tho 
several  weeks  ending  in  the  particular  calendar  month. 

Forms. — The  returns  should  be  made  on  Form  728x1.  Instructions 
for  preparing  the  return  will  be  found  on  the  back  of  the  form. 

Inspection  of  books. — The  books  of  every  person  liable  to  the  tax 
shall  be  open  at  all  times  for  inspection  by  examining  internal-rev- 
enue officers. 

Payment. — Remittance  of  the  amount  of  the  tax  should  accompany 
the  return  as  made.    See  article  15. 

EXTENSION  OF  EXISTING  STATUTES. 

Sec.  1305.  That  all  admnistratlve,  special,  or  stamp  provisions  of 
law,  including  the  law  relating  to  the  assessment  of  taxes,  so  far  as 
applicable,  are  hereby  extended  to  and  made  a  part  of  this  Act,  and 


10 

every  person  liable  to  any  tax  imposed  by  tliis  Act,  or  for  the  collection 
thereof,  sliall  Iceep  such  records  and  render,  under  oath,  such  statements 
and  returns,  and  shall  comply  with  such  regulations  as  the  Commis- 
sioner with  the  approval  of  the  Secretary  may  from  time  to  time  pre- 
scribe. 

Whenever  in  the  judgment  of  the  Commissioner  necessary  he  may 
require  any  person,  by  notice  served  upon  him,  to  make  a  return  or 
such  statements  as  he  deems  sufficient  to  show  whether  or  not  such 
person  is  liable  to  tax. 

The  Commissioner,  for  the  purpose  of  ascertaininj;  the  correctness 
of  any  return  or  for  the  purpose  of  inakng  a  return  where  none  has 
been  made,  is  hereby  authorized,  by  any  revenue  agent  or  inspector 
designated  by  him  for  that  purpose,  to  examine  any  books,  papers, 
records,  or  memoranda  bearing  upon  the  matters  required  to  be  in- 
cluded in  the  return,  and  may  require  the  attendance  of  the  person 
rendering  the  return  or  of  any  officer  or  employee  of  such  person,  or 
the  attendance  of  any  other  person  having  knowledge  in  the  premises, 
and  may  take  his  testimony  with  reference  to  the  matter  required  by 
law  to  be  included  in  such  return,  with  pov/er  to  administer  oaths  to 
such  person  or  persons. 

Art.  12.  Aids  to  collection  of  tax. — In  collecting  the  excise  taxes  the 
Commissioner  has  the  benefit  of  all  existing  internal-revenue  laws. 
In  aid  of  the  enforcement  of  the  statute  the  Commissioner  may  require 
any  person  to  keep  specified  records,  to  render  returns  and  statements 
as  directed,  to  submit  himself  and  his  books  to  examination,  and  to 
comply  with  such  regulations  as  may  be  prescribed. 

CREDITS  AND  REFUNDS. 

Sec.  1310  (a).  That  in  the  case  of  any  overpayment  or  overcoUection 
of  any  tax  imposed  by  section  six  hundred  and  twenty-eight  or  six 
hundred  and  thirty  or  by  Title  V,  Title  VIII,  or  Title  IX,  the  person 
making  such  overpayment  or  overcoUection  may  take  ci'edit  therefor 
against  taxes  due  upon  any  monthly  return,  and  shall  make  refund  of 
any  excessive  amount  collected  by  him  upon  proper  application  by  the 
person  entitled  thei'eto. 

Art.  13.  If  a  taxpayer  overpays  the  tax  due  with  one  return,  he 
may  take  credit  for  the  overpayment  against  the  tax  due  with  the 
succeeding  return. 

Art.  14.  Claims  for  refund. — For  procedure  with  reference  to  claims 
for  refund,  see  sections  3220  and  3225  of  the  Revised  Statutes,  as 
amended  by  section  1316  of  the  Eevenue  Act  of  1918,  and  Eegulations 
No.  14  (revised). 

MEDIUM  OF  PAYI^IENT  OF  TAX. 

Skc.  1314.  That  collectors  may  receive,  at  par  with  an  adjustment 
for  accrued  interest,  certificates  of  indebtedness  issued  by  the  United 
States  and  uncertified  checks  in  payment  of  income,  war-profits,  and 
excess-profits  taxes  and  any  other  taxes  payable  other  than  by  stamp, 
during  such  time  and  under  such  regulations  as  the  Commissioner, 
with  the  approval  of  the  Secretary,  shall  prescrile;  but  if  a  check 


11 

so  received  is  not  paid  by  tlie  bank  on  which  it  is  drawn  the  person 
by  whom  such  check  has  been  tendered  shall  remain  liable  for  the 
payment  of  the  tax  and  for  all  legal  penalties  and  additions  the  same 
as  if  such  check  had  not  been  tendered. 

Art.  15.  Payment  of  tax  by  uncertified  checks. — Collectors  may  ac- 
cept uncertified  checks  in  payment  of  excise  taxes,  provided  such 
checks  are  collectible  at  par;  that  is,  for  their  full  amount  without 
any  deduction  for  exchange  or  other  charges.  The  collector  will 
stamp  on  the  face  of  each  check  before  deposit  the  words  "  This  check 
is  in  payment  of  an  obligation  to  the  United  States  and  must  be  paid 
at  par.  No  protest,"  \'itli  his  name  and  title.  The  day  on  which  the 
collector  receives  the  check  will  be  considered  the  date  of  payment  so 
far  as  the  taxpayer  is  concerned,  unless  the  check  is  returned  dishon- 
ored. If  one  check  is  remitted  to  cover  two  or  more  persons'  taxes, 
the  remittance  must  be  accompanied  by  a  letter  of  transmittal  stating 
(a)  the  name  of  the  drawer  of  the  check ;  (b)  the  amount  of  the  check ; 
(c)  the  amount  of  any  cash,  money  order,  or  other  instrument  in- 
cluded in  the  same  remittance;  (d)  the  name  of  each  person  whose 
tax  is  to  be  paid  by  the  remittance;  (e)  the  amount  of  the  payment 
on  account  of  each  i^erson;  and  (f)  the  kind  of  tax  paid. 

Art.  16.  Procedure  with  respect  to  dishonored  checks. — If  the  bank  on 
which  any  such  check  is  drawn  should  refuse  to  x^ay  it  at  par,  the 
check  should  be  returned  through  the  depositary  bank  and  be  treated 
in  the  same  manner  as  a  bad  check.  All  expenses  incident  to  the  at- 
tempt to  collect  such  a  check  and  the  return  of  it  through  the  de- 
positary bank  must  be  paid  by  the  drawer  of  the  check  to  the  bank 
on  which  it  is  drawn,  since  no  deduction  can  be  made  from  amounts 
received  in  payment  of  taxes.  See  section  3210  of  the  Revised  Stat- 
utes. If  any  taxpayer  whose  check  has  been  returned  uncollected 
by  the  depositary  bank  should  fail  at  once  to  make  the  check  good, 
the  collector  should  proceed  to  collect  the  tax  as  though  no  check 
had  been  given.  A  taxpayer  who  tenders  a  certified  check  in  pay- 
ment for  taxes  is  also  not  released  from  his  obligation  until  the 
check  has  been  paid.     See  chapter  191  of  the  Act  of  March  2,  1911. 

MISREPRESENTATION  OF  TAX. 

Sec.  1319.  That  whoever  in  connection  with  the  sale  or  lease  or 
offer  for  sale  or  lease,  of  any  article,  or  for  the  purpose  of  making 
such  sale  or  lease,  makes  any  statement,  written  or  oral,  (1)  in- 
tende<l  or  calculated  to  lead  any  person  to  believe  that  any  part  of 
the  price  at  Avhich  such  article  is  sold  or  leased,  or  offered  for  sale  or 
lease,  consists  of  a  tax  imposed  under  the  authority  of  the  United 
States,  or  (2)  ascribing  a  particular  part  of  such  price  to  a  tax  imposed 
under  the  authority  of  the  United  States,  knowing  that  such  state- 
ment is  false  or  that  the  tax  is  not  so  great  as  the  portion  of  such 
price  ascribed  to  such  tax,  shall  be  guilty  of  a  misdemeanor  and  upon 
conviction  thereof  shall  be  punished  by  a  fine  of  not  more  than  $1,000 
or  by  imprisonment  not  exceeding  one  year,  or  both. 


12 

Art.  17.  If  a  lessor  or  other  person  in  the  lease  of  a  film  mis- 
represents the  tax,  he  is  guilty  of  a  misdemeanor  and  is  liable  to  a  fine 
of  $1,000  and  to  imprisonment  for  a  year.  This  provision  is  designed, 
among  other  things,  to  prevent  a  lessor  from  adding  more  than  the 
amount  of  the  tax  to  the  sum  charged  for  the  use  of  a  film  and 
representing  that  the  increase  is  due  to  the  tax. 

PENALTIES. 

Section  317G  of  United  States  Eevised  Statutes,  as  amended  by 
section  1317  of  Revenue  Act  of  1918 : 

Sec.  3176.  *  *  *  In  case  of  any  failure  to  make  and  file  a  return 
or  list  within  the  time  prescribed  by  law,  or  prescribed  by  the  Com- 
missioner of  Internal  Revenue  or  the  collector  in  pursuance  of  law, 
the  Commissioner  of  Internal  Revenue  shall  add  to  the  tax  twenty-five 
per  centum  of  its  amount,  except  that  when  a  return  is  filed  after  such 
time  and  it  is  shown  that  the  failure  to  file  it  was  due  to  a  reasonable 
cause  and  not  to  willful  neglect,  no  such  addition  shall  be  made  to  the 
tax.  In  case  a  false  or  fraudulent  return  or  list  is  willfully  made,  the 
Commissioner  of  Internal  Revenue  shall  add  to  the  tax  fifty  per  centum 
of  its  amount. 

The  amount  so  added  to  any  tax  shall  be  collected  at  the  same  time 
and  in  the  same  manner  and  as  part  of  the  tax  unless  the  tax  has 
been  paid  before  the  discovery  of  the  neglect,  falsity,  or  fraud,  in  which 
case  the  amount  so  added  shall  be  collected  in  the  same  manner  as 
the  tax. 

Sections  903, 1308,  and  1319  of  the  Eevenue  Act  of  1918 : 

Sec.  903.  *  *  *  If  the  tax  is  not  paid  when  due,  there  shall  be 
added  as  a  part  of  the  tax  a  penalty  of  five  per  centum,  together  with 
interest  at  the  rate  of  one  per  centum  for  each  full  month,  from  the 
time  when  the  tax  becomes  due. 

Sec.  1308.  (a)  That  any  person  required  under  Titles  ♦  *  *  IX 
*  *  *  to  pay,  or  to  collect,  account  for,  and  pay  over  any  tax,  or 
required  by  law  or  regulations  made  under  authority  thereof  to  make 
a  return  or  supply  any  information  for  the  purposes  of  the  computa- 
tion, assessment,  or  collection  of  any  such  tax,  who  fails  to  pay,  col- 
lect, or  truly  account  for  and  pay  over  any  such  tax,  make  any  such 
return,  or  supply  any  such  information  at  the  time  or  times  required 
by  law  or  regulation  sliall  in  addition  to  other  penalties  provided  by 
law  be  subject  to  a  penalty  of  not  more  than  $1,000. 

(6)  Any  person  who  willfully  refuses  to  pay,  collect,  or  truly  ac- 
coiHit  for  and  pay  over  any  such  tax,  make  such  return  or  supply 
such  information  at  the  time  or  times  required  by  law  or  regulation, 
or  who  willfully  attempts  in  any  manner  to  evade  such  tax  shall  be 
guilty  of  a  misdemeanor  and  in  addition  to  other  penalties  provided 
by  law  shall  be  fintnl  not  more  than  $10,000  or  imprisoned  for  not  more 
than  one  year,  or  both,  together  with  the  costs  of  prosecution. 

(c)  Any  person  who  willfully  refuses  to  pay,  collect,  or  truly  account 
for  and  pay  over  any  such  tax  shall  in  addition  to  other  penalties  pro- 
vided by  law  be  liable  to  a  penalty  of  the  amount  of  the  tax  evaded, 
or  not  paid,  collected,  or  accounted  for  and  paid  over,  to  be  assessed 


13 

and  collected  in  the  same  manner  as  taxes  are  assessed  and  collected: 
Provided,  however,  That  no  penalty  shall  be  assessed  under  this  subdi- 
vision for  any  offense  for  wliich  a  penalty  may  be  assessed  under  au- 
thority of  section  thirty-one  iuindred  and  seventy-six  of  the  Revised 
Statutes,  as  amended     *     *     *. 

{d)  The  term  "person  "  as  used  in  this  section  includes  an  officer  or 
employee  of  a  corporation  or  a  member  or  employee  of  a  partnership, 
who  as  such  officer,  employee,  or  member  is  under  a  dutj'  to  perfoTm 
the  act  in  respect  of  which  the  vioUation  occurs. 

Sec.  1319.  That  whoever  in  connection  with  the  sale  or  lease,  or  offer 
for  sale  or  lease,  of  any  article,  or  for  the  purpose  of  making  sucli  sale 
or  lease,  makes  any  statement,  written  or  oral,  (1)  intended  or  calcu- 
lated to  lead  any  person  to  believe  that  any  part  of  the  price  at  which 
such  article  is  sold  or  leased,  or  offered  for  sale  or  lease,  consists  of  a 
tax  imposed  under  the  authority  of  the  United  States,  or  (2)  ascribing 
a  particular  part  of  such  price  to  a  tax  imposed  under  the  authority  of 
the  United  States,  knowing  that  such  statement  is  false  or  that  the  tax 
is  not  so  great  as  the  portion  of  such  price  ascribed  to  such  tax,  shall  be 
guilty  of  a  misdemeanor  and  upon  conviction  thereof  shall  be  punished 
by  a  fine  of  not  more  than  .$1,000  or  by  imprisonment  not  exceeding  one 
year,  or  both. 

AUTHORITY  FOR  REGULATIONS. 

Sec.  1309.  That  the  Commissioner,  with  the  approval  of  the  Secre- 
tary, is  hereby  authorized  to  make  all  needful  rules  and  regulations 
for  the  enforcement  of  the  provisions  of  this  Act. 

Art.  18.  Promulgation  of  regulations. — In  pursuance  of  the  statute 
the  foregoing  regulations  are  hereby  made  and  promulgated,  and  all 
rulings  inconsistent  herewith  are  hereby  revoked. 

Daniel  C  Eoper, 

Commissioner  of  Internal  Revenue. 
Approved : 

Carter  Glass, 

Secretary  of  the  Treasw^. 


INDEX. 

Article. 

Authority   for   regulations 18 

Bad  debts,  allowances  or  deductions 4,  6 

Bankruptcy,  returns  by  trustee  in 11 

Books,   taxpayers',  inspection 11 

Branch   offices,   returns 11 

Charging  tax  to  lessee 8 

Checlvs,  dishonored,  in  payment  of  tax,  procedure  as  to 16 

Uncertified,  payment  of  tax  by 15, 16 

Claims  for  refund  of  tax 14 

Collection  of  taxes,  aid  of  existing  statutes 12 

Copies,  statement  showing  tax  liability  of  exhibitor 7 

Credits,   lessees 6 

Lessors 4 

Overpayments 13 

Owuer-esliibitor 5 

Date  returns  due 11 

Tax    effective 2 

Deductions,    lessees 6 

Lessors 4 

Owner-exhibitor 5 

Definitions: 

"  Exhibitor  " 1 

"  Lease  " 1 

"  Lessor  " 1 

"  Person.  " 1 

"  Rental    value  " 1,  5 

Dishonored  cheeks  in  payment  of  tax,  procedure  as  to 16 

Exhibitor,  definition 1 

Expenses,  credits  or  deductions 4,  5,  6 

Fair  market  price,  lease  at  less  than 10 

Forms,    returns 11 

Inspection  of  books  of  taxpayers 11 

Lease  at  less  than  fair  market  price 10 

Lease,    definition 1 

Lessee,  charging  tax  to 8 

Liability  to  tax 3 

Measure  of  tax 6 

Lessor,    definition 1 

Liability    to    tax 3 

Measure  of  tax; 4 

Statement  showing  tax  liability  of  exhibitor 7 

Letter  of  transmittal  accompanying  check  in  payment  of  tax 15 

Licensees,  charging  tax   to 8 

(15) 


16 

Article. 

Licensor,  statoniont  showing  tfix  liability  of  exhibitor 7 

Marliet  i)rice,  lease  at  less  than 10 

Measure  of  tax,  lease  at  less  than  fair  market  price 10 

Lessees 6 

Lessors 4 

Owuer-exhibitor 5 

Price  advanced  to  cover  tax 8 

Medium  of  payment  of  tax 15,  IG 

Misrepresentation  of  tax 17 

Montlily  returns 11 

Oath,  monthly  returns 11 

Overpayment  of  tax,  credit 13 

Owners,  liability  to  tax 3 

Rate  of  tax 5 

Payment  of  taxes,  medium 15,16 

Person,    definition 1 

Liable  to  tax 3 

Principal,  liability  to  tax  where  lease,  etc.,  executed  by  agent 3 

Prior  statutes,  refund  of  taxes  paid  under 9 

Promulgation  of  regulations 18 

Kate  of  tax,  lessors 4 

Owner-exhibitor 5 

Receivers,    returns 11 

Records,    taxpayers' 11, 12 

Refund  of  tax_ 14 

Taxes  paid  under  former  statutes 9 

Rental  value,  definition 1,5 

Rentals,  measure  of  tax 4,  5 

Returns 11,12 

Exhibitor 7 

Lessors 4 

Owner-exhibitor 5 

Statement  showing  tax  liability  of  exhibitor 7 

Terms  defined 1 

Time  .tax  effective 2 

Transfer  of  burden  of  tax 7,  8 

Trustee  in  bankruptcy,  returns 11 

Uncertified  checks,  payment  of  tax  by 15, 16 

Witnesses  to  monthly  returns 1>. 

Words  aud  phrases :  See  Definitions,  ante. 

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